Solutions exist to fix Broken Britain but Tories and Labour won’t use them

WHAT would a genuinely progressive Labour government look like?

OK, I know this question is so fanciful that some of you are already choking on your porridge. But consider this a useful thought experiment – especially as Labour’s shadow chancellor, Rachel “cut-and-paste” Reeves, has just let it be known that she is not simply proposing to delay the implementation of her flagship £28 billion green industrial policy, she’s planning to dump it entirely.

Sir Keir Starmer (below) is betting that lots of disgruntled Tories are going to stay at home for next year’s General Election, giving Labour a big majority. After last week’s mind-numbing Autumn Statement from Chancellor Jeremy Hunt, that still seems the most likely prognosis.

Hunt made much of cutting national insurance by a smidgeon. But by freezing thresholds he is sweeping millions of folk into higher tax brackets next year. Does he seriously think they won’t notice?

That said, Starmer’s honeymoon period in Number 10 is likely to be the shortest on record for the simple reason Labour have no programme whatsoever for government. Zilch. Zero. Nada. Unless you count Ms Reeves’s predilection for Tory-style austerity.

Presumably, the Labour team is banking on economic growth supplying some ready spending money in time for their second term – much as Gordon Brown did during his tenure as chancellor.

Alas, as the latest Office for Budget Responsibility forecasts show, growth will be in short supply. Besides, Starmer and Reeves will find themselves instantly under attack from a populist right that is prepared to spend, spend, spend, and damn the fiscal consequences.

So, how should a progressive administration respond? The secret is that a genuinely progressive government would start by implementing structural reforms that don’t initially require lots of dosh. But you have to be willing to challenge the establishment status quo – which neither Sir Keir nor Reeves will do in a month of very long Sundays.

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Start with the UK’s low productivity and low growth problem. The cause is crystal clear – we invest more in land and property than we do in factories, machines and new technology. Our leading competitors do the reverse. Solution – change tax incentives to penalise investment in property and to encourage investment in production. This can be fiscally neutral. Tax land and reduce taxes on capital investment. Investing in land is non-productive so penalise it.

The difficulty is that shifting to a land tax regime (there are variations on how to do it) takes time to implement without causing economic chaos. This is why land value taxes remain a pipe dream in practice. To actually implement one properly will take 10 to 15 years.

Fortunately, most British governments in recent times have lasted three sessions. So a committed radical administration would probably have the time in office to do the job.

But we are not finished. How to incentivise capital investment? Hunt has just chosen the most stupid method possible. His big idea in the Autumn Statement was to grant firms a permanent 100% tax write-off against capital investment. In other words, you can forget the nominal rate of corporation tax.

Any profits a company currently earns, it can keep, provided it re-invests in plant, machinery and (of course) industrial property. Expect Reeves to retain this tax loophole.

Why is this totally daft – apart from the fact we’ve tried several times before and it didn’t work? For starters, there’s no new cash for new companies and new, disruptive technologies. The investment cash stays with the existing companies who use it to protect their monopolies. Innovation actually stagnates under this approach.

Secondly, much of UK industry is foreign owned – so expect the saved corporation tax to be fiddled out of Britain to where the company is actually based.

Thanks a bundle, Jeremy.

AGAIN, the solution is fairly straightforward. First, direct tax incentives towards individuals who invest long term. For instance, if you start a company, you get to keep a high percentage of profits or capital gains on the shares, provided you keep your investment holding for a specified period.

Or incentivise investment funds directly. Or set up state investment banks funded by private equity. At the same time, put penal taxes on all forms of pure financial speculation, such as hedge funds.

Next problem – pensions. The British state pension is already ludicrously low. But expect the next government – even a Labour one – to scrap the triple lock on pensions, to find some sort of fiscal wriggle room.

What to do? Answer: revive an old idea from Sweden – one that John McDonnell wanted to introduce when he was Jeremy Corbyn’s shadow chancellor. This involves a modest tax on corporate profits paid annually not in cash but in shares. These shares are held by a national pension fund.

This levy represents a minimum burden on companies – they can always issue new shares. But over time – say 30 years – the national pension fund would become immensely rich. The annual income stream from the fund’s equity stake would eventually pay for the state pension.

The other big agenda item facing any progressive administration is how to improve public-sector efficiency without breaking the bank. The typical resort is to private money. Labour’s rising star, the tiresomely over-confident Wes Streeting (below), is obviously planning to privatise chunks of the NHS – though he might call it by a different name. But we have tried privatisation repeatedly and it always fails.

Reason – the public sector is labour intensive but profit-seeking companies make cash by cutting their workforce. QED.

I dare say that artificial intelligence will have a role in improving efficiency in the public sector – it could do wonders in heath diagnostics. But we have to accept that the public sector needs better-trained staff and a caring ethos to function. The solution lies not in ultra centralisation, the strategy that has dominated for the past 40 years.

Centralisation cuts overheads in the short term but then raises costs by generating a bigger and bigger managerial bureaucracy and endless red tape. Witness the NHS. The true solution is radical decentralisation – small is indeed beautiful.

How to achieve this? One route is to transfer more responsibility from Whitehall and Westminster to elected regional administrations in England, to the devolved parliaments, and above all to local government everywhere. That would involve a radical decentralisation of taxes including the introduction of a local income tax.

Shorter decision-making lines and more local accountability are the only genuine paths to public sector efficiency. Again, this will take time. On the other hand, short-termism is part of the current malaise in public administration.

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None of this is rocket science. But it would require convincing the electorate that fixing a broken Britain (or Scotland) is not only possible but that it requires time and a national effort. Alas, even north of the Border, we have become used to our political elite promising the earth for next week.

If Scottish independence is off the immediate agenda, then Scottish progressives need to think how to rebuild a national coalition by advancing real, practical solutions at a devolved level.

To make that possible, they need to reach out to other progressives in Wales, Ireland and – above all – England.